a

GAO

United States General Accounting Office

Report to Congressional Requesters

December 2003 TAX 

ADMINISTRATION

More Can Be Done to 

Ensure Federal 

Agencies File 

Accurate Information 

Returns

GAO-04-74
Federal agencies do not always adhere to information return reporting 

requirements. About $5 billion in payments to 152,000 payees made during 

2000 and 2001 by agencies within three federal departments were not 

reported to IRS. About 8,800 of these payees had received $421 million in 

payments, yet had failed to file a tax return for these years. In addition, 

about $20 billion in payments that were reported to IRS on 170,000 

information returns for 2000 and 2001 included invalid vendor TINs. This 

was due in part to the fact that few federal agencies use IRS’s TIN-matching 

program, as use of this program is optional. 

IRS has acted to aid federal agencies in complying with annual information 

return filing requirements. In August 2003, IRS notified federal agencies 

about information returns filed for 2001 that included invalid vendor TINs 

and the need for agencies to withhold a portion of future payments if the 

vendors fail to provide a valid TIN. IRS is also in the process of making the 

TIN-matching program available online. 

IRS does not currently have a program to identify and follow up with federal 

agencies that fail to file required annual information returns for vendor 

payments. Improvements to IRS’s Payer Master File, which contains general 

information on all payers who file information returns, would be necessary 

for such a program. In addition, although the Central Contractor 

Registration is intended for use as a central source of valid vendor 

information by all federal agencies, it contains some invalid TINs. Due to 

statutory restrictions, all vendor TINs in this database cannot currently be 

validated through the IRS TIN-matching program, but options exist to 

address this problem. 

Forms 1099 MISC Submitted to IRS by Federal Agencies for Vendor Payments, Including 

Those with Invalid Vendor Taxpayer Identification Numbers That IRS Was Unable to Correct - 

Tax Years 2000 and 2001 Combined 

 

Note: GAO analysis of IRS data. 

The Internal Revenue Service (IRS) 

matches information returns filed 

by third parties, including federal 

agencies, with taxpayers’ income 

tax returns to determine whether 

taxpayers have filed a return and/or 

reported all of their income. A 

correct taxpayer identification 

number (TIN) is necessary to 

enable IRS to match these returns. 

Prior GAO reviews have shown 

that federal agency payment 

records often include invalid TINs, 

particularly for vendors. GAO was 

asked to study federal agencies’ 

compliance with filing information 

returns for service payments made 

to vendors, IRS’s efforts to improve 

agencies’ compliance, and whether 

additional measures could improve 

their compliance. 

To improve federal agency 

compliance with annual 

information reporting requirements 

for vendor payments, GAO is 

making recommendations to 

ensure that (1) IRS identifies and 

follows up with federal agencies 

that fail to file annual information 

returns for vendor service 

payments and (2) IRS and the 

Office of Management and Budget 

(OMB) ensure that vendor TINs are 

validated using IRS’s online TINmatching program. 

IRS and OMB agreed to implement 

our recommendations. 

www.gao.gov/cgi-bin/getrpt?GAO-04-74.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Michael 

Brostek at (202) 512-9110 or 

brostekm@gao.gov. 

Highlights of GAO-04-74, a report to 

congressional requesters 

December 2003

TAX ADMINISTRATION

More Can Be Done to Ensure Federal 

Agencies File Accurate Information 

Returns 
Page i GAO-04-74 Information Returns for Vendors

Contents

Letter 1

Results in Brief 3

Background 5

Not All Federal Agencies File Required Information Returns or Take 

Steps to Ensure That Information Provided Is Valid 7

IRS Has Acted to Improve Form 1099 MISC Reporting

Compliance 12

IRS Has No Program to Identify Federal Agencies That Fail to File 

Forms 1099 MISC and the CCR Does Not Now Serve as a Central 

Source of Valid TINs 13

Conclusions 16

Recommendations for Executive Action 17

Agency Comments and Our Evaluation 17

Appendixes

Appendix I: Objectives, Scope, and Methodology 21

Appendix II: Forms 1099 MISC Filed by 14 Federal Departments for Tax 

Years 2000 and 2001 24

Appendix III: Forms 1099 MISC Filed with IRS with Invalid TINs for Tax 

Years 2000 and 2001 25

Appendix IV: Comments from the Internal Revenue Service 26

Appendix V: Comments from the Department of Defense 29

Appendix VI: GAO Contacts and Staff Acknowledgments 31

GAO Contacts 31

Acknowledgments 31

Tables Table 1: Number and Dollar Value of Forms 1099 MISC Filed with 

IRS for Tax Years 2000 and 2001 24

Table 2: Number and Percent of Forms 1099 MISC Filed with 

Invalid TINs for Tax Years 2000 and 2001 25

Figure Figure 1: Forms 1099 MISC Submitted to IRS by Federal Agencies 

for Vendor Payments, Including Those with Invalid 

Vendor TINs That IRS Was Unable to Correct - Tax Years 

2000 and 2001 Combined 9
Page ii GAO-04-74 Information Returns for Vendors

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

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Page 1 GAO-04-74 Information Returns for Vendors

United States General Accounting Office

Washington, D.C. 20548

A

December 5, 2003 Letr

The Honorable Bill Thomas

Chairman, Committee on Ways and Means

House of Representatives

The Honorable Amo Houghton

Chairman, Subcommittee on Oversight

Committee on Ways and Means

House of Representatives

Federal agencies pay billions of dollars each year to vendors for services, 

such as compensation paid to individuals that are not employees and 

medical and health care payments. At the same time, some vendors fail to 

pay their taxes and have accrued billions of dollars in delinquent federal 

taxes. The Internal Revenue Service’s (IRS) ability to ensure vendors are 

properly paying their taxes hinges on having complete and accurate reports 

from federal agencies on their vendor payments. 

The Internal Revenue Code requires any service recipient, including federal 

agencies, to report service payments to IRS if the services total $600 or 

more during a calendar year. An IRS Form 1099 MISC (Miscellaneous 

Income) information return is used to report service payments to IRS and 

must include the vendor’s name, address, and taxpayer identification 

number (TIN).1

 

IRS matches information returns with income tax returns to determine 

whether taxpayers have filed a return and/or reported all of their income. 

For fiscal year 2002, IRS used information returns to detect about 1.5 

million taxpayers that underreported their income by about $2.5 billion and 

also identified about 2 million taxpayers with tax liabilities of $2.4 billion 

that failed to file tax returns. However, when the TIN on an information 

return is invalid2

 and IRS cannot ascertain the correct TIN, IRS is unable to 

match the information return data with tax return data and is thus unable 

1

 The TIN is a unique nine-digit number, usually a social security number (SSN) for an 

individual, an employer identification number (EIN) assigned by IRS for a partnership or 

corporation, and either an SSN or EIN if the vendor is a sole proprietor.

2

 In this report, an invalid TIN refers to a missing TIN, a TIN with more or less than nine 

numeric characters, a TIN that includes an alpha character, or a TIN/name combination that 

does not match or cannot be found in IRS’s records. 
Page 2 GAO-04-74 Information Returns for Vendors

to detect either whether a taxpayer underreported income or failed to file a 

tax return. 

To help federal agencies identify whether vendor TINs are valid, in 1997 

IRS initiated a TIN-matching program that agencies can use, prior to filing 

their information returns, to determine whether vendors have provided a 

correct TIN/name combination. If a vendor either fails to provide a TIN or 

provides a TIN/name combination that does not match information in IRS’s 

records, and the vendor subsequently fails to provide a correct TIN/name 

combination upon request, the federal agency is required to initiate backup 

withholding3

of future payments for services. 

Despite these efforts, our reviews of IRS’s Federal Payment Levy Program4

showed that federal agency payment records often contained invalid or 

missing TINs and, therefore, could not be used to levy vendors’ federal 

payments to recover delinquent federal taxes.5

 As a result, you asked us to 

assess whether federal agencies in general have been submitting complete 

and accurate annual information returns to IRS for service payments to 

vendors. Specifically, our objectives were to determine (1) the extent to 

which federal agencies file required Forms 1099 MISC, take steps to ensure 

that information on the returns, particularly TINs, are valid, and initiate 

backup withholding if vendors provide invalid TINs; (2) recent actions IRS 

has taken to help improve federal agency Form 1099 MISC filing 

compliance; and (3) whether any additional measures could further 

improve federal agency compliance with Form 1099 MISC filing 

requirements. 

3

 Section 3406 of the Internal Revenue Code requires that payers withhold and forward to 

IRS a predetermined percentage of certain payments if a payee fails to provide the payer 

with a correct TIN; this is known as backup withholding.

4

 The Federal Payment Levy Program, authorized by the Taxpayer Relief Act of 1997 and 

conducted jointly by IRS and the Department of the Treasury’s Financial Management 

Service, enables IRS to levy up to 15 percent of certain federal payments to collect 

delinquent federal taxes, including payments made to vendors. 

5

 U.S. General Accounting Office, Tax Administration: IRS’ Levy of Federal Payments 

Could Generate Millions of Dollars, GAO/GGD-00-65 (Washington, D.C.: Apr. 7, 2000) and 

Tax Administration: Millions of Dollars Could Be Collected If IRS Levied More Federal 

Payments, GAO-01-711 (Washington D.C.: July 20, 2001).
Page 3 GAO-04-74 Information Returns for Vendors

To meet our objectives, we requested and obtained vendor payment 

information for service payments made by the agencies and bureaus within 

the 14 federal departments6

 for calendar years 2000 and 2001 and compared 

this information to vendor payment information included in IRS’s Payer 

Master File and Information Returns Master File for the same 2-year 

period. We also surveyed the 14 federal departments on their policies and 

practices for obtaining vendor TINs and filing required Forms 1099 MISC. 

In addition, we discussed with IRS officials actions recently taken or 

pending for assisting federal agencies in filing complete and accurate 

Forms 1099 MISC for service payments to vendors. Finally, we discussed 

with both IRS and Office of Management and Budget (OMB) officials 

additional measures that could further improve federal agency compliance 

with Form 1099 MISC filing requirements. Our work was done from June 

2002 through September 2003 in accordance with generally accepted 

government auditing standards. (App. I describes our overall objectives, 

scope, and methodology.)

Results in Brief Federal agencies are not always filing required Forms 1099 MISC or taking 

steps to ensure that information on the returns is valid. For example, we 

found that about $5 billion in payments to about 152,000 payees made by 

agencies within three federal departments during 2000 and 2001 were not 

reported to IRS on Forms 1099 MISC, and about 8,800 of the payees failed 

to file an income tax return for these years. In addition, about $20 billion in 

service payments on almost 170,000 Forms 1099 MISC—13 percent of the 

information returns filed by agencies within the 14 federal departments for 

2000 and 2001 combined—included invalid TINs. IRS was unable to 

correct the TINs on about 116,000 of these returns (68 percent) valued at 

almost $9 billion, thus rendering them unusable for determining whether 

the vendors had reported this income. In response to our survey, only two 

federal departments indicated that their agencies were either using IRS’s 

TIN-matching program to validate vendor TINs or initiating backup 

withholding if vendors failed to provide valid TINs departmentwide. While 

officials from some federal departments said they were unaware of IRS’s 

TIN-matching program, others thought the program was currently 

unavailable. The main reason cited for not initiating backup withholding 

was the lack of a process in place within their respective financial 

6

 The Department of Homeland Security had not been established at the time this review 

began.
Page 4 GAO-04-74 Information Returns for Vendors

management systems for accomplishing backup withholding of vendor 

payments if vendors failed to provide valid TINs.

IRS has taken recent action and has other actions planned to assist federal 

agencies in complying with Form 1099 MISC filing requirements. For 

example, in August 2003 IRS sent a specific notice to federal agencies for 

the first time, identifying Forms 1099 MISC filed by the agencies for 2001 

that included invalid vendor TINs and reminding the agencies of their 

responsibility to ensure that valid vendor TINs are provided and to initiate 

backup withholding of subsequent payments for vendors who fail to 

provide a valid TIN. Also, in late 2003 IRS plans to expand its TIN-matching 

program to enable federal agencies to submit online up to 100,000 

TIN/name combinations at one time and to receive a response from IRS 

within 24 hours concerning whether these combinations match the 

TIN/name combinations in IRS’s records. 

IRS does not identify agencies that fail to file Forms 1099 MISC and IRS and 

OMB have not taken steps to realize the potential of the Central Contractor 

Registration (CCR)—a Department of Defense (DOD) database of vendors 

that have registered to do business with DOD—to better ensure that 

agencies include accurate TINs on their Forms 1099 MISC for federal 

vendors. IRS does not currently have a program to identify and follow up 

with federal agencies that fail to file Forms 1099 MISC. Although such a 

program would be beneficial, it would require that IRS’s Payer Master File, 

which IRS could use to identify federal agencies that do not file Forms 1099 

MISC, be complete, accurate, and up to date. We found that 96 out of 147 

federal agencies for which we had requested information from IRS were 

not specifically identified as federal payers in the Payer Master File. 

Further, although IRS’s online TIN-matching program has the potential to 

assist federal agencies in reducing the number of Forms 1099 MISC 

submitted to IRS with invalid TINs, as of October 2003 OMB began 

requiring all federal agencies to use the CCR as the single validated source 

of information about vendors doing business with the federal government. 

However, TINs recorded in the CCR are not validated via IRS’s TINmatching program, there are no current plans to require such validation, 

and our work has raised concerns about the validity of TINs contained in 

the CCR. Having DOD validate vendor TINs recorded in the CCR through 

IRS’s TIN-matching program would eliminate the need for each individual 

federal agency to do so and would further OMB’s goal of having the CCR be 

a central source of valid vendor data. DOD cannot validate all vendor TINs 

under current law, but could if vendors gave it permission to do so or if the 

law was changed. 
Page 5 GAO-04-74 Information Returns for Vendors

We are making recommendations to ensure that IRS identify and follow up 

with federal agencies that fail to file annual information returns for vendor 

service payments and that IRS and OMB ensure that vendor TINs are 

validated using IRS’s TIN-matching program. Both IRS and OMB generally 

agreed with our recommendations. DOD also indicated that actions were 

underway that should eventually enable vendor TINs in the CCR to be 

validated via IRS’s TIN-matching program.

Background Section 6041A of the Internal Revenue Code requires any service recipient, 

including federal agencies, to file an annual information return with IRS for 

payments made to any person for services totaling $600 or more during a 

calendar year. Payments to corporations for certain services provided 

must also be reported, such as attorneys’ fees and medical and health care 

payments. In addition, federal executive agencies must report all payments 

for services provided by vendors, including payments made to 

corporations. Specific information required on the annual information 

return—an IRS Form 1099 MISC—includes the name, address, and TIN of 

both the payer and payee, as well as the total amounts paid during the year 

for the various types of services provided. The purpose of the Form 1099 

MISC filing requirement is to enable IRS to identify taxpayers who fail to 

file an income tax return as well as those who fail to report all of their 

income on their tax return for the related year. 

IRS enters Form 1099 MISC information in both a Payer Master File (PMF) 

and an Information Returns Master File (IRMF). The PMF is a database 

that includes all entities that make payments subject to information return 

reporting. The PMF includes general information on the total number and 

dollar value of information returns, including Forms 1099 MISC, filed by 

each payer for each year. The IRMF is a database that includes specific 

information on the type and amount of payments made to each payee, 

including whether the payee TIN was valid upon receipt of the information 

return and if the TIN was invalid, whether it was subsequently corrected by 

IRS. Both the PMF and IRMF include the payer’s TIN.

Upon receipt of a Form 1099 MISC, basic information is entered into a 

temporary IRS database. IRS compares the payee TIN/name combination 

with TIN/name combinations in its records to determine if there is a match. 

If there is a match, the information is entered in the IRMF without the need 

for additional action. If there is not a match, IRS will try to validate the 

TIN/name combination via a TIN “validation” process, which entails 

matching the TIN and name control—the first four characters of an 
Page 6 GAO-04-74 Information Returns for Vendors

individual’s last name or the first four characters of a business name—on 

the Form 1099 MISC with (1) a file which contains all social security 

numbers ever issued and all name controls ever associated with them and 

(2) a file that contains all employer identification numbers ever issued and 

all name controls ever associated with them. If IRS is able to match the 

TIN and name control through this process, the information is entered in 

the IRMF with a code indicating that the TIN was corrected and is valid. If 

IRS is unable to match the TIN and name control, the information is 

entered in the IRMF with a code indicating that the TIN is invalid. 

If the vendor TIN included on the Form 1099 MISC is initially valid or 

subsequently corrected by IRS, and the vendor files a tax return for the 

corresponding year, IRS can electronically match the TIN, name control, 

and amount entered in the IRMF with the amount reported on the vendor’s 

tax return via the Document Matching Program.7

 This enables IRS to 

determine whether the vendor has reported all of the income on the tax 

return. Alternatively, if there is no corresponding return with the same TIN 

and name control as that entered in the IRMF, IRS can determine that the 

vendor is a potential nonfiler. However, if the TIN entered in the IRMF is 

invalid, IRS is unable to use the information to detect either underreporting 

or nonfiling on the part of a vendor.

Since 1997, IRS has had a TIN-matching program that federal agencies can 

use to verify the accuracy of TIN/name combinations furnished by federal 

payees. This program was intended to reduce the number of notices of 

incorrect TIN/name combinations issued for backup withholding by 

allowing agencies the opportunity to identify TIN and name discrepancies 

and to contact payees for corrected information before issuing an annual 

information return, such as a Form 1099 MISC. Monthly, federal agencies 

can submit a batch of TIN/name combinations to IRS for verification. IRS 

then matches each record submitted and informs the agency whether the 

TIN and name combination submitted matches its records.8

In order to encourage vendors to provide a valid TIN and to ensure that 

taxes are paid when they do not, Internal Revenue Code Section 3406 

7

 The Document Matching Program matches information on selected tax issues (usually 

income) reported on tax returns by individual taxpayers and reported on information 

returns by third parties, such as employers, banks, and other payers of income. 

8

 IRS cannot tell an agency what the correct TIN, name, or both TIN and name should be if 

the records do not match, as to do so would violate tax disclosure laws.
Page 7 GAO-04-74 Information Returns for Vendors

requires payers, including federal agencies, to initiate backup withholding 

of a federal payment if a payee, including a vendor, fails to provide a TIN or 

provides an invalid TIN, and upon notice fails to provide a correct TIN. IRS 

considers a TIN to be missing if it is not provided, has more or less than 

nine numbers, or has an alpha character in one of the nine positions. IRS 

considers the TIN to be invalid if it is in the proper format, but the 

TIN/name combination doesn’t match or cannot be found in IRS or Social 

Security Administration files. Payments subject to backup withholding 

include various types of income reportable on a Form 1099 MISC, including 

compensation paid to individuals that are not employees. The current rate 

for backup withholding is 30 percent of the payment.

Not All Federal 

Agencies File Required 

Information Returns or 

Take Steps to Ensure 

That Information 

Provided Is Valid

Federal agencies are not always adhering to Form 1099 MISC filing 

requirements. For 2000 and 2001, about 152,000 information returns for 

federal payments totaling about $5 billion were not filed with IRS, while 

about 170,000 information returns, including $20 billion in federal 

payments that were filed, included invalid TINs. Few agencies are taking 

advantage of IRS’s TIN-matching program to validate vendor TINs prior to 

submitting information returns to IRS. Similarly, few agencies are initiating 

backup withholding on payments made to vendors that have provided 

invalid TINs. 

With Some Exceptions, 

Federal Agencies File 

Forms 1099 MISC

While most federal agencies filed information returns for vendors, some 

did not. For both 2000 and 2001, the 14 federal departments collectively 

filed over 600,000 Forms 1099 MISC in which they reported over 

$100 billion in payments each year. (See app. II for the number and dollar 

value of Forms 1099 MISC filed individually by the 14 federal departments.) 

Although the 14 federal departments collectively filed a substantial number 

of Forms 1099 MISC over this 2-year period, we found some significant 

exceptions, as the following examples illustrate.

• About $5 billion in payments to about 152,000 payees made collectively 

by the Departments of Agriculture, Commerce, and Justice for 2000 and 

2001 combined were not reported to IRS on Forms 1099 MISC. About 

8,800 of these payees who collectively received payments totaling about 

$421 million dollars—an average of about 48,000 each—failed to file an 

income tax return for these 2 years, according to IRS’s records. If 

information returns had been filed and IRS had this information, it 
Page 8 GAO-04-74 Information Returns for Vendors

would have provided a basis for IRS to assess the appropriate taxes 

against these payees. 

• Almost $3.0 billion in payments made via purchase cards by DOD 

between 2000 and 2001 had not been reported to IRS due to incorrect or 

missing vendor TINs. DOD officials indicated that obtaining vendor 

information needed for Forms 1099 MISC from payment card companies 

has been a long-standing problem. They estimated that they could have 

filed as many as 40,000 additional Forms 1099 MISC for 2000 and 2001 if 

they had received the necessary vendor information from payment card 

companies.

• According to the Department of Transportation, Forms 1099 MISC were 

not filed for services if the vendor was a corporation that provided both 

goods and services, as their vendor payment system cannot distinguish 

between the two for the purpose of issuing Forms 1099 MISC. As a 

result, only about $8 million of $92 million in service payments for tax 

years 2000 and 2001 were reported to IRS on Forms 1099 MISC. 

• One Department of Housing and Urban Development agency that made 

payments to vendors for services totaling over $73 million for 2000 and 

2001, failed to file any Forms 1099 MISC for these 2 years. According to 

a Department of Housing and Urban Development official, because the 

agency is a wholly owned corporation within HUD and is therefore 

quasi-federal, agency officials were not aware that they were required to 

file Forms 1099 MISC. They further indicated that the agency had 

subsequently issued Forms 1099 MISC to its vendors for payments made 

for 2002. 

In response to our survey of departmental policies and practices for filing 

Forms 1099 MISC, department officials cited various reasons for not filing a 

Form 1099 MISC for vendor payments. Not having a valid vendor TIN was 

the foremost reason cited. Other reasons included the inability to 

distinguish between goods and services provided by a vendor,9

 as cited 

above, and problems obtaining necessary vendor information, namely 

TINs, from payment card companies for vendors that are paid via 

government purchase cards. 

9

 We did not review the capabilities of individual agency and department vendor payment 

systems to distinguish between goods and services, as this was beyond the scope of our 

review. 
Page 9 GAO-04-74 Information Returns for Vendors

Forms 1099 MISC Often 

Include Missing or Incorrect 

TINs

Even when federal agencies do file Forms 1099 MISC, they often include an 

invalid vendor TIN. As a result, IRS has to expend resources in an attempt 

to identify a correct TIN via its TIN validation process and, in most cases, 

IRS is unable to use the information returns to determine whether vendors 

had either underreported their income or failed to file a tax return. As 

shown in figure 1, the 14 federal departments filed almost 170,000 Forms 

1099 MISC with invalid vendor TINs for tax years 2000 and 2001 combined. 

Almost $20 billion in vendor payments were included on these information 

returns. Overall, for the 2 years combined, about 13 percent of all Forms 

1099 MISC filed by the 14 federal departments included an invalid TIN 

when they were submitted to IRS. (See app. III for the number and 

percentage of Forms 1099 MISC filed individually by the 14 federal 

departments with invalid TINs.)

Figure 1: Forms 1099 MISC Submitted to IRS by Federal Agencies for Vendor 

Payments, Including Those with Invalid Vendor TINs That IRS Was Unable to Correct 

- Tax Years 2000 and 2001 Combined

Note: GAO analysis of IRS data.

13% 87%

68%

32%

Corrected

1,098,929

Valid TINs

169,378

Invalid TINs

Uncorrected

Source: IRS.

115,993

53,385
Page 10 GAO-04-74 Information Returns for Vendors

As also shown in figure 1, IRS was subsequently able to correct about 32 

percent of the invalid vendor TINs through its TIN validation process. 

However, IRS was unable to correct the invalid TINS included on about 

116,000 of the Forms 1099 MISC filed by the 14 departments, which were 

valued at almost $9 billion, an average of about $77,000 per return. As a 

result, IRS would be unable to match this income with income reported on 

income tax returns for the same period to determine whether these 

vendors had either underreported the income or failed to file a tax return.

One reason cited by department officials for filing Forms 1099 MISC with 

invalid TINs was the lack of a means for validating vendor TINs. This was 

cited, in particular, by those departments whose agencies were not using 

IRS’s existing TIN-matching program. 

In addition to negatively affecting IRS’s ability to ensure that vendors 

report all required income on their tax returns, invalid vendor TINs also 

impede the Department of the Treasury’s ability to offset federal tax debts 

through the Federal Payment Levy Program, as well as its ability to offset 

other debts through the Treasury Offset Program.10 Each program requires 

a match of the payee’s TIN and name control on both the payment record 

submitted to the Financial Management Service (FMS) and the debt 

information included in the FMS database, in order for the payment to be 

offset against the debt. 

Federal Agencies Do Not 

Consistently Use IRS’s TINMatching Program 

Although the TIN-matching program is available, most federal agencies do 

not consistently use this program to ensure that the TINs included on 

information returns are valid. From our survey of federal department 

policies and practices for obtaining vendor TINs and filing required Forms 

1099 MISC we found the following. 

• Officials from only 2 of the 14 federal departments—Labor and Housing 

and Urban Development—said their agencies were currently using IRS’s 

TIN-matching program departmentwide. Even so, we noted that 

according to IRS’s records, agencies within both departments had filed 

10 The Debt Collection Improvement Act of 1996 requires federal agencies to obtain a valid 

TIN from federal payees, including vendors, to facilitate federal debt collection via the 

Treasury Offset Program. The Treasury Offset Program involves a centralized database of 

delinquent federal nontax debts that have been referred by federal agencies for offset 

against federal payments processed by the Department of the Treasury’s Financial 

Management Service. 
Page 11 GAO-04-74 Information Returns for Vendors

some Forms 1099 MISC for tax years 2000 and 2001 with invalid vendor 

TINs. 

• Three other federal departments—Health and Human Services, Interior, 

and Justice—indicated that IRS’s TIN--matching program is used, but 

only by some of the agencies or bureaus within the respective 

departments. 

While officials from some federal departments said they were unaware of 

the TIN-matching program, others thought the program was currently 

unavailable. DOD officials stated that they rely on the CCR for validating 

vendor TINs and thus do not use the IRS TIN-matching program. A 

Department of the Interior official indicated that it is in the process of 

implementing use of the CCR by its bureaus and agencies as of October 

2003 at the direction of OMB. 

In General, Federal 

Agencies Do Not Initiate 

BackupWithholding as 

Required 

Although backup withholding is required if vendors fail to provide a valid 

TIN to a federal payer, most federal agencies do not initiate backup 

withholding. From our survey of federal department policies and practices 

for obtaining vendor TINs and filing required Forms 1099 MISC we found 

the following. 

• Officials from only 2 of the 14 federal departments—Energy and 

Transportation—said that their agencies initiate backup withholding 

departmentwide. 

• Three other federal departments—Health and Human Services, Interior, 

and Justice—indicated that backup withholding is initiated only by 

some of the agencies or bureaus within the respective departments.

The main reason cited by officials from several of the federal departments 

for not initiating backup withholding was the lack of a process in place 

within their respective financial management systems for accomplishing 

backup withholding of vendor payments.11 Some department officials also 

indicated that they had no way of knowing when a vendor’s TIN is invalid 

and therefore subject to backup withholding. An official with one of the 

agencies within the Department of Health and Human Services indicated 

11 As indicated earlier, we did not review the capabilities of individual agency and 

department vendor payment systems, as this was beyond the scope of our review.
Page 12 GAO-04-74 Information Returns for Vendors

that they deny payment to vendors who fail to provide a valid TIN in lieu of 

backup withholding.

IRS Has Acted to 

Improve Form 1099 

MISC Reporting 

Compliance

IRS has taken some recent actions and has other actions planned to assist 

federal agencies in complying with Forms 1099 MISC filing requirements, 

as the following examples illustrate. 

• In August 2003, for the first time, IRS sent a specific notice (Notice 1313) 

to federal agencies identifying Forms 1099 MISC filed for 2001 in which 

the vendor’s TIN was invalid and reminding the agencies of their 

responsibility to ensure that TINs are valid and to initiate backup 

withholding for any vendors who subsequently fail to provide the 

agency with a correct TIN upon notification by the agency. Sending 

these notices annually may address agency concerns about not having a 

way to determine that a vendor’s TIN is invalid and that backup 

withholding should be initiated.

• By the end of 2003, IRS plans to expand its TIN-matching program to 

enable federal agencies to submit online up to 100,000 TIN/name 

combinations at a time and to receive a response from IRS within 24 

hours concerning whether the TIN/name combinations submitted match 

the TIN/name combinations in IRS’s records. As an interim step, IRS 

plans to have an interactive computer application available that will 

allow federal agencies to submit up to 25 TIN/name combinations and 

receive feedback within 5 seconds on whether these match the 

TIN/name combinations in IRS’s records. As with the existing TINmatching program, IRS will not be able to provide an agency with the 

correct TIN or name if they do not match IRS’s records due to the 

disclosure laws. Instead, the agencies will continue to be responsible 

for contacting a vendor for the correct TIN/name combination. 

However, the online TIN-matching program should make it easier for 

federal agencies to identify vendors that are to be contacted to obtain a 

valid TIN and thus prevent the agencies from filing Forms 1099 MISC 

that include invalid TINs.

• In February 2003 IRS issued a proposed revenue procedure that would 

enable payment card companies to act on behalf of cardholders/payers, 

such as federal agencies, in soliciting, collecting, and validating vendor 

information, including TINs. This procedure would enable payment 

card companies to use IRS’s TIN-matching program to validate the 

TIN/name combinations provided by vendors for which a Form 1099 
Page 13 GAO-04-74 Information Returns for Vendors

MISC is to be filed. Once adopted, this procedure may help to eliminate 

some of the problems agencies have experienced in getting necessary 

vendor information related to purchase card payments. 

In addition, IRS has initiated meetings with various federal agencies, 

including the Departments of Defense and Agriculture, to identify specific 

problems associated with obtaining valid vendor TINs and filing accurate 

Forms 1099 MISC, particularly problems related to purchase card 

payments. In November 2003, IRS plans to present a federal agency 

seminar covering various topics related to filing Forms 1099 MISC, 

including use of the TIN-matching program, information reporting 

requirements, and the previously mentioned proposed revenue procedure. 

IRS Has No Program to 

Identify Federal 

Agencies That Fail to 

File Forms 1099 MISC 

and the CCR Does Not 

Now Serve as a Central 

Source of Valid TINs

Although IRS can identify whether Forms 1099 MISC filed by federal 

agencies include a valid TIN, IRS does not have a program to identify and 

follow up with agencies that fail to file Forms 1099 MISC. In addition, the 

CCR does not, as OMB intends, serve as a central source of valid TIN data 

that federal agencies can use. 

At Present, IRS Has No 

Program to Detect Federal 

Agencies That Do Not File 

Forms 1099 MISC

IRS does not have a program to periodically identify and follow up with 

federal agencies that fail to file Forms 1099 MISC for vendor payments. IRS 

officials indicated that their emphasis has been on identifying Forms 1099 

MISC filed with invalid TINs by nonfederal payers. This is because Internal 

Revenue Code section 6721 authorizes IRS to assess a penalty of $50 

against a nonfederal payer for each information return filed with an invalid 

TIN, up to a maximum penalty of $250,000 per calendar year. IRS proposed 

just over $204 million in penalties against nonfederal payers for 

information returns with invalid TINs for tax years 2000 and 2001 

combined. IRS estimated that an additional $6.9 million in penalties could
Page 14 GAO-04-74 Information Returns for Vendors

have been proposed against federal agencies for filing information returns 

with invalid TINs, if IRS had the authority to do so.12

A complete and accurate Payer Master File, which includes general payer 

information, such as the payer name and TIN, as well as the total number 

and dollar value of various types of Forms 1099 filed by each payer, would 

enable IRS to identify federal agencies that fail to file Forms 1099 MISC. 

IRS could then contact these agencies to ascertain why these returns were 

not filed. IRS initially indicated to us that federal payers are specifically 

coded as such in the Payer Master File to distinguish them from nonfederal 

payers. However, we found that 96 of 147 federal agencies and bureaus for 

which we needed information concerning Forms 1099 MISC they filed with 

IRS for 2000 and 2001 were not coded as federal payers in the Payer Master 

File. IRS officials agreed that there is a need to update the Payer Master 

File to ensure that all federal payers are properly coded as federal. 

Conducting a survey of all payers included in this file would be a way for 

IRS to update this information, thus ensuring that all federal payers are 

correctly coded as federal in the Payer Master File.

TINs in the CCR Are Not 

Validated

OMB has instructed federal agencies to begin using the CCR as of October 

2003, as the single validated source of information about vendors doing 

business with the federal government, but CCR vendor TINs are not 

validated with IRS’s TIN-matching program. The CCR, which is maintained 

by DOD, includes information on over 234,000 vendors that have registered 

to do business with DOD, including the vendors’ TIN and name. The 

accuracy and completeness of information listed in this database is the 

responsibility of the individual vendors and must be updated annually. 

According to CCR officials, vendor TINs are not validated via IRS’s TINmatching program. Instead, CCR does an edit check to ensure that a 

vendor’s TIN is in the correct format, namely that it contains nine numbers. 

12 IRS Policy Statement P-2-4 states “penalties and interest will not be assessed against 

agencies or instrumentalities of the United States.”
Page 15 GAO-04-74 Information Returns for Vendors

At the time of our review and resulting July 2001 report13 mentioned earlier, 

we found that there were a substantial number of invalid vendor TINs in 

the CCR. In addition, during our current review, we found that the CCR 

included about 7,000 vendor employer identification numbers that were not 

included in IRS’s Business Master File.14

Due to the lack of validated TINs in the CCR, agencies’ use of this 

centralized database as a source of TINs for vendors in and of itself would 

not ensure that the agencies include valid TINs on Forms 1099 MISC 

submitted to IRS. As noted earlier, in line with OMB’s expectations, DOD 

relies on the CCR as a source of valid TINs and therefore does not use IRS’s 

TIN-matching program; Interior officials say they also plan to use the CCR. 

If the name and TIN of vendors recorded in the CCR were validated by 

DOD initially and then periodically thereafter through IRS’s TIN-matching 

program, the CCR could become a central source of valid vendor TINs for 

all agencies to use for their Forms 1099 MISC submitted to IRS. However, 

because agencies are restricted to using the TIN-matching program only for 

validating TINs for which an information return is required, DOD would not 

be able to validate all vendor TINs included in the CCR because not all 

vendors in the CCR actually receive DOD contracts to provide services. 

This restriction could be addressed through a change to the disclosure 

laws, thus authorizing DOD to use the TIN-matching program for all 

vendors that have registered with the CCR. Alternatively, individual 

vendors could be asked to agree to have their TIN and name matched to 

IRS data when they apply to do business with the government. Section 

6103 of the Internal Revenue Code protects taxpayer information, including 

TINs, from disclosure. However, taxpayers can waive this protection. This 

would enable IRS to provide more information than can currently be 

provided under the TIN-matching program, such as the correct TIN/name 

combination.

Given that the CCR is not currently a valid source of vendor TINs, agencies 

cannot rely on the CCR as OMB intends. Therefore, each agency would 

need to use IRS’s online TIN-matching program as the only way to 

independently verify vendor TINs necessary to include on their Forms 1099 

13 GAO-01-711.

14 The Business Master File is an IRS database that contains tax return filing histories for 

business entities.
Page 16 GAO-04-74 Information Returns for Vendors

MISC. However, at the present time agency use of the TIN-matching 

program is optional.

Conclusions Some federal agencies’ failure to file required annual Forms 1099 MISC and 

other agencies’ failure to file returns with valid vendor TINs adversely 

affects IRS’s efforts to detect unreported vendor income and vendors that 

fail to file income tax returns. In addition, invalid TINs in federal agency 

payment records negatively affect Department of the Treasury efforts to 

offset federal tax debts through the Federal Payment Levy Program and 

other federal debts through the Treasury Offset Program. 

Although IRS has taken some positive actions to improve federal agency 

compliance with Form 1099 MISC filing requirements, additional steps 

could be taken. IRS could identify and follow up with federal agencies that 

fail to file required Forms 1099 MISC if it had a complete and accurate 

Payer Master File. In addition, the CCR could become, as OMB intends, a 

central source for valid vendor information, including TINs. Currently, 

CCR TIN data are not always accurate. Except for current statutory 

restrictions on the use of IRS’s TIN-matching program, the CCR’s 

administrator, DOD, could use IRS’s new online TIN-matching program to 

routinely verify the TINs of all vendors as they are added to the CCR and 

then periodically thereafter. This would carry out OMB’s desire for the 

CCR to be a central source of valid vendor information and would thereby 

avoid each agency independently verifying TINs for some of the same 

vendors. Asking vendors to permit DOD to routinely verify their TINs 

when they register to do business with the federal government would be 

one option to enable DOD to verify TINs in the CCR against IRS’s records. 

Alternatively, OMB and IRS could determine whether an exception to 

section 6103 of the Internal Revenue Code should be requested.

In the absence of the CCR as a valid source of TINs, agencies must 

individually and voluntarily use IRS’s TIN-matching program to validate 

vendor TINs. Agencies have not consistently used the TIN-matching 

program in large part because they say they were unaware of it. IRS’s new 

online TIN-matching program and publicity IRS plans as it launches the 

new system later this year may make officials more aware of the program 

and increase their use of it. However, until OMB is able to realize its intent 

of having the CCR be a valid source of information for federal vendors, 

additional assurance could be gained that agencies would use the matching 

program if OMB required them to do so. Because IRS has made the system 
Page 17 GAO-04-74 Information Returns for Vendors

available online, fulfilling such a requirement should now be easier than in 

the past.

Recommendations for 

Executive Action

To ensure that federal agencies file Forms 1099 MISC for payments to 

vendors for services provided, we recommend that the Commissioner of 

Internal Revenue 

• ensure the accuracy of identification information concerning federal 

payers in IRS’s Payer Master File and 

• develop a program to periodically identify federal agencies that fail to 

file Forms 1099 MISC and follow up to determine why the forms were 

not filed.

To minimize duplicate agency effort in validating vendors’ TINs and to 

reinforce the anticipated role of the Central Contractor Registration as the 

single validated source of vendors doing business with the federal 

government, we also recommend that the Commissioner of Internal 

Revenue and the Director of the Office of Management and Budget 

consider options to routinely validate all vendor TINs in the CCR and to 

then require all agencies to use vendor and TIN information from the CCR 

for their Forms 1099 MISC. If this proves to be infeasible, OMB should 

require each agency to validate TINs for vendors who provide services 

through IRS’s TIN-matching program. 

Agency Comments and 

Our Evaluation

We received written comments on a draft of this report from the 

Commissioner of Internal Revenue (see app. IV) and the Under Secretary of 

Defense (Comptroller) (see app. V). 

The Commissioner agreed with our recommendations. However, he also 

emphasized that agencies may not wish to spend the resources to 

effectively use IRS’s TIN-matching program and that IRS cannot compel 

agencies to meet their Form 1099 MISC reporting responsibilities.

To ensure the accuracy of identification information concerning federal 

payers included in IRS’s Payer Master File, the Commissioner agreed to 

perform periodic reviews of the database to ensure its accuracy. In 

addition, as part of an education-compliance program geared to federal 

agencies that IRS is in the process of developing, the Commissioner stated 
Page 18 GAO-04-74 Information Returns for Vendors

that IRS plans to contact federal agencies to identify and verify that all TINs 

used by each agency have been properly identified, thus compiling an 

accurate list of all federal agency payer TINs.

To identify federal agencies that fail to file Forms 1099 MISC and the 

reasons why the forms were not filed, the Commissioner agreed to 

compare the above mentioned list of federal agency payer TINs to the 

Payer Master File to identify agencies that did not file Forms 1099 MISC 

and to then contact the agencies to determine if Forms 1099 MISC were 

required.

To minimize duplicate agency effort in validating vendors’ TINs and to 

reinforce the role of the CCR as the single validated source of vendors 

doing business with the federal government, the Commissioner agreed that 

IRS will work with DOD to ensure that vendor TINs on the CCR are 

accurate, to include exploring the expanded use of the TIN-matching 

program to validate all TINs included in the CCR.

In addition to commenting on the report recommendations, the 

Commissioner pointed out that IRS Policy Statement P-2-4, which provides 

that federal agencies are not subject to penalties and interest for failure to 

comply with Form 1099 MISC filing requirements, is based on a 1978 GAO 

Comptroller General Decision (B-161457). This decision states that agency 

appropriations are not available for payment of interest and penalties. The 

Commissioner noted that if an agency does not wish or is unable to comply 

with its Form 1099 MISC reporting responsibilities, there is nothing that 

IRS can do but rely on voluntary compliance on the part of the agency. 

Although we agree that IRS cannot compel agencies to meet their Form 

1099 MISC reporting responsibilities, we believe implementing our 

recommendations will better ensure that agencies do so. For instance, by 

bringing to agencies’ attention that they are not filing the required 

information returns, IRS can help educate agencies about their reporting 

responsibilities. Further, by improving the validity of TINs in the CCR, IRS, 

working with OMB, can make it easier for agencies to comply.

The Commissioner also stated that a number of federal agencies indicated 

that they have been unable to use IRS’s TIN-matching program because 

their financial reporting systems were incompatible with the TIN-matching 

program and that the cost to make agency systems compatible would be 

prohibitive. If IRS and DOD are able to arrange validation of TINs included 

in the CCR via the TIN-matching program as we recommend, this would 
Page 19 GAO-04-74 Information Returns for Vendors

eliminate the need for individual agencies to use the TIN-matching 

program. In the event that IRS and DOD are unable to work out such an 

arrangement, IRS’s online TIN-matching program, which can be accessed 

via the Internet using a desk-top workstation, may be an effective 

alternative to agencies making substantial changes to their financial 

accounting systems. 

The Under Secretary of Defense (Comptroller) did not directly say he 

agreed with our recommendation, but indicated that efforts currently 

underway to improve the accuracy of TINs in the CCR for both DOD and all 

other federal agencies mirror our recommendation for IRS and OMB to 

consider options to routinely validate all vendor TINs in the CCR and to 

require all agencies to use vendor and TIN information from the CCR for 

their Forms 1099. The Under Secretary pointed out that the mandated use 

of the CCR throughout the federal government coupled with IRS’s online 

TIN-matching program should enable DOD to establish a basic level of 

validation in the near term, perhaps as soon as the second quarter of fiscal 

year 2004.

The Under Secretary also pointed out that the Defense Finance and 

Accounting Service has been working with payment card companies, such 

as VISA and Master Card, to improve the process for reporting payments 

made via payment cards. As a result, DFAS expects a significant increase 

in the number and dollars reported for the card programs on Forms 1099 

for calendar year 2003. We commend these efforts to address the longstanding problem of obtaining necessary vendor information from payment 

card companies. Coupled with IRS’s proposal to enable payment card 

companies to act on behalf of cardholder/payers in soliciting, collecting, 

and validating vendor information, including TINs, these efforts should go a 

long way in addressing this problem. 

On November 26, 2003, we also received oral comments from 

representatives of OMB's Offices of Federal Procurement Policy and 

Federal Financial Management. OMB generally agreed with our 

recommendation. Accordingly, OMB agreed to develop and issue a 

memorandum to federal agencies directing them to validate TINs by using 

the TIN-matching program or the CCR. In addition, OMB agreed to work 

with IRS and the CCR to ensure agencies are provided the necessary 

information to use either of the methods recommended. Although we 

believe that either using IRS’s TIN-matching program or validating TINs in 

the CCR can be effective means for ensuring that agencies include valid 

TINs on their Forms 1099 MISC, using the CCR as the primary source of 
Page 20 GAO-04-74 Information Returns for Vendors

valid TINs would reinforce OMB’s intention that the CCR become the 

government’s central source of contractor data and would minimize 

duplicate effort among agencies in validating TINs. Therefore, we 

encourage OMB to pursue use of the CCR as the primary option for 

agencies to obtain valid TINs.

We are sending copies of this report to the Ranking Minority Member, 

House Committee on Ways and Means; Ranking Minority Member, 

Subcommittee on Oversight, House Committee on Ways and Means; and 

the Chairman and Ranking Minority Member, Senate Committee on 

Finance. We will also send copies to the Commissioner of Internal 

Revenue, the Director of the Office of Management and Budget, the 

Secretary of Defense, and other interested parties. Copies of this report 

will also be made available to others upon request. The report will also be 

available at no charge on GAO’s Web site at http://www.gao.gov.

If you have any questions concerning this report, please contact me at (202) 

512-9110 or Ralph Block at (415) 904-2150. Key contributors to this report 

are listed in appendix VI.

Michael Brostek

Director, Tax Issues
Page 21 GAO-04-74 Information Returns for Vendors

Appendix I

Objectives, Scope, and Methodology ApApenednxidexiIs

Our objectives were to determine (1) the extent to which federal agencies 

file required Forms 1099 MISC, take steps to ensure that information on the 

returns, particularly Taxpayer Identification Numbers (TIN), are valid, and 

initiate backup withholding if vendors provide invalid TINs; (2) recent 

actions the Internal Revenue Service (IRS) has taken to help improve 

federal agency Form 1099 MISC (Miscellaneous Income) filing compliance; 

and (3) whether any additional measures could further improve federal 

agency compliance with Form 1099 MISC filing requirements.

Scope and 

Methodology

To determine whether federal agencies annually file required Forms 1099 

MISC with IRS, we requested and obtained vendor service payment 

information from the 14 federal departments for calendar year 2000 and 

2001. We specifically asked for the vendor name, TIN, and total dollar 

value of all payments made by the various agencies and bureaus within 

these departments for services provided during calendar years 2000 and 

2001. However, we were unable to verify whether they fully complied with 

our request, such as only providing payments for services and not for 

goods. We compared the information we obtained from the 14 federal 

departments with vendor payment information included in IRS’s Payer 

Master File (PMF) and Information Returns Master File (IRMF) for the 

same 2-year period. On the basis of our review of IRS's procedures for 

processing information returns and our testing of database extracts 

obtained from IRS's Payer Master File and Information Returns Master 

File, we determined that the data were sufficiently reliable to enable us to 

determine whether Forms 1099 MISC had been filed by the agencies and 

bureaus within the 14 federal departments and, if so, whether they included 

valid vendor TINs. 

We obtained vendor payment information from the following federal 

departments:1

Agriculture

Commerce

Defense

Education

Energy

Health and Human Services

1

 The Department of Homeland Security had not been established at the time this review 

began. 
Appendix I

Objectives, Scope, and Methodology

Page 22 GAO-04-74 Information Returns for Vendors

Housing and Urban Development

Interior

Justice

Labor

State

Transportation

Treasury

Veterans Affairs

In an effort to gauge the potential result of not filing Forms 1099 MISC, we 

selected payment information provided to us by the agencies within 3 of 

the 14 federal departments for 2000 and 2001 and identified the amounts 

paid to individual payees that were not included on IRS’s IRMF, thus 

indicating that a Form 1099 MISC had not been filed. We then compared 

the payee information to an IRS file of nonfilers to determine whether the 

individual payees had filed federal income tax returns for the comparable 

years. 

To determine whether Forms 1099 MISC filed with IRS by federal agencies 

include valid vendor TINs, we analyzed IRS’s IRMF for calendar years 2000 

and 2001. We identified the number and dollar value of Forms 1099 MISC 

filed by the 14 federal departments that, according to the IRMF, contained 

invalid TINs. Of these, we further identified the number and dollar value 

associated with invalid TINs that IRS was able to correct via its TIN 

validation program, as well as those that remained invalid because IRS was 

unsuccessful in correcting them.

To determine whether federal agencies take steps to ensure that 

information on the returns, particularly TINs, is valid, by using IRS’s TINmatching program to validate vendor TINs or initiate backup withholding 

on future payments to vendors that have submitted invalid TINs, we sent a 

survey to the 14 federal departments about their policies and practices for 

obtaining vendor TINs and filing Forms 1099 MISC. We asked whether they 

validate vendor TINs through IRS’s TIN-matching program and if not, why 

not. We also asked whether they initiate backup withholding if it is 

determined that a vendor has provided an invalid TIN. We then 

summarized the overall department responses.

To identify recent actions IRS has taken to help improve federal agency 

Form 1099 MISC filing compliance, we discussed with IRS officials any 

actions that were either recently implemented or pending. We also tracked 
Appendix I

Objectives, Scope, and Methodology

Page 23 GAO-04-74 Information Returns for Vendors

the progress of IRS’s pending on-line TIN-matching program, which is 

expected to be available to federal agencies in the latter part of 2003.

To identify any additional measures that could further improve federal 

agency compliance with Form 1099 MISC reporting requirements, we 

discussed this issue with IRS and the Office of Management and Budget 

(OMB) officials and analyzed both recent and pending actions that would 

affect such compliance. 

We did our work at IRS and OMB headquarters in Washington, D.C., from 

June 2002 through September 2003 in accordance with generally accepted 

government auditing standards.

We obtained written comments on a draft of this report from the 

Commissioner of Internal Revenue (see app. IV) and the Secretary of 

Defense (see app. V). We also obtained oral comments from 

representatives of the Office of Management and Budget.
Page 24 GAO-04-74 Information Returns for Vendors

Appendix II

Forms 1099 MISC Filed by 14 Federal 

Departments for Tax Years 2000 and 2001 ApendxiI

This appendix provides details concerning the specific number and dollar 

value of Forms 1099 MISC filed by each of the 14 federal departments for 

tax years 2000 and 2001.

As table 1 shows, the Department of Defense filed the greatest number and 

dollar value of Forms 1099 MISC each year, while the Department of 

Transportation filed the least. With a few exceptions, most departments 

filed more Forms 1099 MISC in 2001 than in 2000.

Table 1: Number and Dollar Value of Forms 1099 MISC Filed with IRS for Tax Years 

2000 and 2001

Source: GAO analysis of IRS’s Information Returns Master File.

a

Less than $1 million rounded.

Dollars in millions (rounded)

Department

Number filed 

for 2000

Amount filed 

for 2000 

Number filed 

for 2001

Amount filed 

for 2001 

Agriculture 32,617 $1,183.1 42,440 $1,579.0

Commerce 7,369 1,370.6 7,601 962.2

Defense 245,917 49,944.3 257,382 60,974.1

Education 2,428 906.1 2,686 1,068.4

Energy 3,587 6,066.4 3,381 7,250.0

Health & Human 

Services 8,464 41,735.4 8,859 40,312.8

Housing & Urban 

Development 17,347 1,118.5 15,522 1,065.9

Interior 23,394 1,292.5 26,197 1,549.3

Justice 21,241 1,705.5 22,868 2,146.6

Labor 66,285 965.4 66,245 1,126.5

State 6,345 1,195.6 6,411 1,552.2

Transportation 93 7.7 4 a

Treasury 5,846 1,537.1 7,481 1,767.7

Veterans Affairs 173,988 6,301.1 186,309 6,953.1

Total 614,921 $115,329.3 653,386 $128,307.8
Page 25 GAO-04-74 Information Returns for Vendors

Appendix III

Forms 1099 MISC Filed with IRS with Invalid 

TINs for Tax Years 2000 and 2001 ApendxiI

This appendix provides details concerning the specific number and 

percentage of Forms 1099 MISC filed by each of the 14 federal departments 

for tax years 2000 and 2001 that included invalid TINs when received by 

IRS.

As table 2 shows, the Departments of Defense and Veterans Affairs filed the 

greatest number of Forms 1099 MISC with invalid TINs each year, while the 

Departments of Transportation and Education filed the least. The 

Departments of Transportation and Agriculture filed the greatest 

percentage of Forms 1099 MISC with invalid TINs each year, while the 

Department of Health and Human Services filed the least.

Table 2: Number and Percent of Forms 1099 MISC Filed with Invalid TINs for Tax 

Years 2000 and 2001

Source: GAO analysis of IRS’s Information Returns Master file.

Department

Number of 

invalid TINs 

2000

Percent of 

invalid TINs 

2000

Number of 

invalid TINs 

2001

Percent of 

invalid TINs 

2001

Agriculture 6,820 20.9 9,518 22.4

Commerce 510 6.9 788 10.4

Defense 27,246 11.1 26,006 10.1

Education 352 14.5 313 11.7

Energy 469 13.1 531 15.7

Health & Human 

Services 503 5.9 493 5.6

Housing & Urban

Development 3,397 19.6 2,916 18.8

Interior 2,986 12.8 3,319 12.7

Justice 3,949 18.6 4,005 17.5

Labor 9,086 13.7 9,555 14.4

State 1,021 16.1 1,053 16.4

Transportation 20 21.5 1 25.0

Treasury 999 17.1 1,132 15.1

Veterans Affairs 25,781 14.8 26,609 14.3

Totals 83,139 13.5 86,239 13.2
Page 26 GAO-04-74 Information Returns for Vendors

Appendix IV

Comments from the Internal Revenue Service ApendxiIV
Appendix IV

Comments from the Internal Revenue Service

Page 27 GAO-04-74 Information Returns for Vendors
Appendix IV

Comments from the Internal Revenue Service

Page 28 GAO-04-74 Information Returns for Vendors
Page 29 GAO-04-74 Information Returns for Vendors

Appendix V

Comments from the Department of Defense ApendxiV
Appendix V

Comments from the Department of Defense

Page 30 GAO-04-74 Information Returns for Vendors
Page 31 GAO-04-74 Information Returns for Vendors

Appendix VI

GAO Contacts and Staff Acknowledgments ApendxiVI

GAO Contacts Michael Brostek, (202) 512-9119

Ralph T. Block, (415) 904-2150

Acknowledgments In addition to those named above, Tom Bloom, Janet Eackloff, Evan 

Gilman, Shirley Jones, Bob McKay, and James Ungvarsky made key 

contributions to this report. 

(440132)
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